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Kate Spade will rely more on its stores to fulfill online orders

August 5, 2016 10:14 AM

Luxury apparel and accessories manufacturer Kate Spade is working to make sure its shoppers get their online orders faster.

CEO Craig Leavitt told analysts on the company’s second quarter 2016 earnings call this week that the company plans to step up its same-day delivery capabilities, though he didn’t specify what those are or how much they will cost shoppers. A Kate Spade spokeswoman did not return a request for comment seeking further clarification.

Executives did make clear that Kate Spade, No. 140 in the Internet Retailer 2016 Top 500 Guide, will rely more heavily on its 426 stores to fulfill online orders in the not-so-distant future. Chief operating officer George Carrara told analysts the company has expanded its ship-from-store pilot program, which it began rolling out in fourth quarter 2015.

Leavitt also noted that Kate Spade plans to let shoppers pick up their online purchases in its stores in the first half of next year. While Kate Spade does not break out online sales in its earnings report. Carrara said that e-commerce sales grew by “double digits” year over year, but he offered no further details. While online sales and traffic grew, average order size and conversion declined during the quarter.

“We attribute this result to increased competition for consumer dollars, the performance of key sale events, as well as the Saffiano Group transition,” Leavitt said, referring to a new line of handbags that debuted online and in Kate Spade’s stores during the quarter.

Kate Spade is moving away from its Cedar Street Handbag Group in favor of its new Saffiano Leather Handbag Group, Cameron Street, Leavitt said. Saffiano leather, pioneered by Prada, is textured and treated to improve durability. Consumer response was positive and the new line performed better than expected, but “we did not have appropriate inventory levels of this new group to meet shifting demand. As a result, while we saw increased traffic in our specialty stores and e-commerce site, we missed some opportunity and experienced a decrease in conversion in the second quarter,” he said. “We have course corrected and plan to complete this transition in the second half of 2016.”

For the second quarter ended July 2, Kate Spade reported:

Net sales of $319.7 million, up 13.7% from $281.1 million last year.

Sales from its Kate Spade North America division of $271.4 million, up 15.1% from $235.7 million last year.

Sales from its Kate Spade International division of $43.4 million, up 6.6% from $40.7 million last year.

Net income of $26.8 million, up 215.2% from $8.5 million last year.

For the first six months of 2016, Kate Spade reported:

Net sales of $594.1 million, up 10.8% from $536.4 million last year.

Sales from its Kate Spade North America division of $490.1 million, up 13.6% from $431.3 million last year.

Sales from its Kate Spade International division of $92.3 million, down 1.0% from $93.2 million last year.

Net income of $38.4 million, compared with a $46.7 million loss last year.